NEW YORK  It's over. Comcast won. After a six-month
fight, AT&T directors voted unanimously late Wednesday to merge their No. 1
cable company, AT&T Broadband, with the No. 3 operator. They'll create a new
giant, AT&T Comcast, that would have $19 billion in annual revenue and 22.8
million subscribers clustered in major markets, including Philadelphia, Detroit,
Boston, Chicago and San Francisco. They'll run an operation with Comcast, which
also controls QVC, E Entertainment Television, the Golf Channel, and some regional
sports services.

The stock deal values AT&T Broadband
at $52 billion. In addition, AT&T Comcast will take over $20 billion in AT&T
debt.

It is a defining moment for the cable industry, and it
promises broad impact for cable consumers. Among other things, AT&T Comcast
vows to accelerate its deployment of competitive local phone services via its
cable lines.

The deal also virtually ensures that the remaining pieces
of AT&T  a company whose name used to be synonymous with phone service
 will be split up and sold. When the cable deal closes, CEO C. Michael
Armstrong will move to AT&T Comcast, where he'll be chairman.

"AT&T Broadband and Comcast can accomplish more together
than we could alone," Armstrong said in a statement.

But Comcast President Brian Roberts will be CEO, and effectively
in charge. His family will own about a third of the voting shares.

Comcast's last-minute agreement to let Armstrong chair
the merged company appeared to have put its bid over the goal line Wednesday
night.

Comcast also accommodated AT&T by embracing phone services.
Up to now, Comcast has said that it wanted to wait for new technologies using
Internet standards that might enable it to offer phone service without the expense
of buying circuit switches.

"The size of our telephony footprint, combined with AT&T's
expertise and leadership in the telephony space, will enable us to accelerate
the deployment of telephone services to many new markets," Roberts said in the
release.

Consumer advocates are wary about the arrangement. The
new company will reach 34% of all cable and satellite subscribers, higher than
the Federal Communications Commission's limit of 30% (which is currently being
challenge in court).

"A combination of that size will have the ability to determine
who makes it in programming," says Consumers Union's Gene Kimmelman. He will
ask the FCC to require AT&T Comcast to sell systems to bring its reach down
to 30%.

AT&T's Armstrong had hoped to restore the clout of the
fading long-distance giant after 1997 when he became CEO. He spent close to
$100 billion buying Tele-Communications and MediaOne in the hope that these
cable companies would provide a platform to build a nationwide AT&T-branded
local phone service. That dream died in 1998 when other operators refused to
go along with his plan.

Comcast put AT&T Broadband in play in July with an unsolicited
stock offer, then valued at $44.5 billion. AT&T quickly rejected it, saying
that the offer  which came to about $4,100 per subscriber  was too
low.

But that bid got things rolling. Under pressure from investors,
who had seen AT&T's stock price plummet 70% since March 2000, Armstrong tried
to win higher offers from other companies and financial backing to keep the
cable unit with AT&T.

In the end, the board had merger proposals from Comcast,
AOL Time Warner and Cox, and was talking to Microsoft about a possible investment.

At midday Wednesday, directors were said to have soured
on AOL's plan to blend its 12.7 million subscribers with AT&T's 14.4 million
customers. They feared that a merger of the two biggest cable companies would
not survive federal antitrust scrutiny.

The Cox offer was complicated by the company's ownership
of TV stations in markets where AT&T has cable systems, including Atlanta and
Seattle. Federal rules prohibit a company from owning a TV station and cable
system in the same community.

And prospects for AT&T to keep its systems independent
faded after Microsoft placed new conditions on a possible investment, estimated
at about $3 billion, in the operation.

It wanted AT&T to offer Microsoft's MSN Internet service
on all of the company's high-speed cable lines. That's on top of an earlier
requirement that AT&T use Microsoft software to operate its interactive TV decoder
boxes.

To keep the deal tax-free for AT&T, its investors will
own more than a majority of the shares  56% of the equity and 66% of the
votes.

The board will have five members from AT&T, five from Comcast,
and two new members picked jointly by the companies.

For more than a year AT&T executives have tried to convince
Wall Street that there's a compelling reason for them to hang onto their cable
business. But it has been a tough sell. Although cable has a brighter future
than AT&T's core long-distance business, it isn't clear how the systems fit
into an overall strategy.

AT&T stayed out of the programming business. So unlike
AOL Time Warner, Comcast, and Cablevision Systems, it can't claim the most common
synergy  using the distributionlines to promote channels.

Armstrong initially had a much bolder idea with his plan
for the nationwide, cable-based local phone business.

Lately Armstrong has said that cable is attractive enough
by itself. Although the core business  retransmitting TV channels 
is mature, he argued that the billions he spent to buy TCI and MediaOne and
upgrade their systems to handle two-way communications would put AT&T Broadband
into the forefront of the convergence revolution.

He saw consumers willing to rush to buy lucrative new services
led by digital cable, high-speed Internet connections, and phone hookups.

And AT&T was well-positioned to ride the wave. Its 14.4
million subscribers are concentrated in 12 of the 25 biggest markets, including
the corridor from Boston to Hartford, Conn.; the San Francisco Bay area; Chicago;
Seattle; Miami; Denver; Dallas; and Atlanta. With 1 million local phone customers,
AT&T has far more than any other cable company.

But even investors who accepted Armstrong's long-term vision
questioned how fast it would materialize  and whether AT&T had the management
skills to make it pay off sooner rather than later. They grew nervous as the
company, which had borrowed heavily to become a cable power, struggled to pare
expenses and integrate the systems.

Many feared that AT&T was thinking like a phone provider
instead of a cable operator. AT&T and Cox are the only cable companies that
have invested heavily in the circuit-switches needed to offer phone services
via cable. Most other operators are waiting for engineers to perfect the potentially
less expensive technology that routes calls using Internet-like digital packets
instead of switches.

Meanwhile AT&T Broadband's expenses took a toll on earnings.
Only about $8.47 of each subscriber's monthly payment early this year found
its way into cash flow. That put AT&T far behind its peers. AOL Time Warner,
Comcast and Cablevision Systems each collected more than $20 a month in cash
flow, and other operators were close behind.

Investors grew impatient as AT&T shares plummeted. Hoping
to focus investor attention on cable's potential, and away from AT&T's long-distance
woes, Armstrong made plans to offer a tracking stock for its cable business.

That set the stage for Comcast's startling announcement
in July that it would offer $44.5 billion in stock for AT&T Broadband.

"The vision of a converged communications company really
is not something that's been proven to work," says Forrester Research analyst
Josh Bernoff. "That was Mike Armstrong's vision."